1. K.S.A. 40-2,101, a "mandated-provider" or "freedom of choice" statute, (1)
requires insurers to pay for the services of specific types of health care
providers; (2) prevents insurance companies from refusing to pay otherwise
authorized charges to a provider who acts within the scope of his or her license;
(3) does not prohibit the use of cost-containment devices, even if those devices
affect different kinds of health care providers in different ways; (4) contains
nothing about the amount that the insurance company must pay for such services
or the conditions that the provider must meet in order to receive payment; and
(5) is to be harmonized with K.S.A. 40-231(b)(3).

2. In a breach of contract action brought by plaintiff chiropractor against defendant
health care insurance carrier alleging violations of K.S.A. 40-2,101 because of
defendant's (1) refusal to reimburse plaintiff for services rendered consistently
with the manner in which defendant reimbursed other health care providers for
similar services and (2) discriminating against chiropractors, the record is
examined and it is held that defendant had neither breached its contracts with
plaintiff nor violated K.S.A. 40-2,101.

Mark G. Arnold, of Husch & Eppenberger, LLC, of St. Louis, Missouri,
argued the cause, and
Alan L. Rupe, of the same firm, of Wichita, and Jane Chandler Holt, of
Blue Cross and Blue Shield of Kansas, of
Topeka, were with him on the briefs for appellant.

Jeffery L. Carmichael, of Morris, Laing, Evans, Brock & Kennedy,
Chtd., of Wichita, argued
the cause, and Robert W. Coykendall and Jana D. Abbott, of the same
firm, were with him on the briefs for
appellee.

Jennifer L. Osborn, William Corum, and Steven L.,
Imber, of Blackwell, Sanders, Peper,
Martin, LLP, of Overland Park, were on the brief for amicus curiae Blue Cross and
Blue Shield of Kansas City
and the Blue Cross and Blue Shield Association.

SIX, J.: This is a breach of contract action. Resolution is based on our
interpretation of K.S.A. 40-2,101, a "mandated-provider" or "freedom of choice" statute.
Plaintiff Mark A. Beck, a chiropractor, was a contracting provider with defendant Blue Cross
and Blue Shield of Kansas, Inc. (Blue Cross) from 1992 through 1996. Dr. Beck sued Blue
Cross, claiming his contracts with Blue Cross violated K.S.A. 40-2,101. The jury awarded
damages to Dr. Beck in the sum of $1,602,200.50.

Blue Cross appeals from the denial of its K.S.A. 2001 Supp. 60-250 motion for
judgment as a matter of law (directed verdict) asking us to vacate the jury's verdict.

Our jurisdiction is under K.S.A. 20-3018(c) (transfer on our own motion).

The first impression issues are: (1) whether the contracts between Dr. Beck and
Blue Cross violated K.S.A. 40-2,101, and (2) if the answer to issue (1) is "yes" and K.S.A.
40-2,101 prohibits disparate treatment of health care providers, whether there was evidence of
a disparate impact on Dr. Beck. We hold that the contracts here do not violate K.S.A.
40-2,101. Thus, we do not reach the second issue. We reverse the judgment in favor of Dr.
Beck and remand with instructions to enter judgment for Blue Cross.

FACTS

Dr. Beck is a chiropractor licensed by the Kansas Board of Healing Arts.
During the relevant time period, Dr. Beck operated three chiropractic clinics in Wichita. Each
clinic contracted with Blue Cross to provide chiropractic services to persons insured by Blue
Cross.

The Contracts

Two types of form contracts prepared by Blue Cross between Dr. Beck and Blue
Cross are at issue in here. The contracts govern the terms of reimbursement received by Dr.
Beck from Blue Cross when services are provided to a Blue Cross insured. The first is the
"competitive allowance program" contract (CAP contract) and the second is the "Kansas
Chiropractor Network contract" (KCN contract).

The CAP contract required Dr. Beck to perform medically necessary
chiropractic services. Dr. Beck agreed to accept a maximum allowable payment, which Blue
Cross would set each year for each procedure. He also agreed to a "most favored nation"
clause, so Blue Cross would not pay more than Dr. Beck received from some other payor for
any particular procedure. For each covered service, Dr. Beck agreed to accept the maximum
allowable payment as payment in full.

In addition, Blue Cross periodically issued policy memos to supplement the
provider agreement. The policy memos became a part of the agreement between Dr. Beck and
Blue Cross. Both the CAP and KCN contracts said:

"Sec. III, GENERAL AGREEMENT OF THE PARTIES

"A. The chiropractor agrees to:

. . . .

"2. . . . Future amendments shall be provided to the chiropractor at least 30
days prior to the effective date of the amendments. In the event that the
changes in the policies and procedures are unacceptable to the chiropractor,
this contract may be cancelled by providing written notice to Blue Cross and
Blue Shield that the contract is to be terminated 30 days from the date of the
notice. If the chiropractor has not exercised, in writing, a notice of
cancellation of this contract on or before the effective date of such
amendments, the chiropractor agrees to abide by such amendments as long as
this contract shall remain in effect." (Emphasis added.)

The KCN contract was initiated in 1990 as a pilot program with chiropractors.
If a chiropractor was a contracting provider under a KCN agreement, the chiropractor's
billings would be adjusted or discounted from 0 percent to 50 percent, depending upon the
chiropractor's average allowed charge per patient per year (AACPPY) from the previous year.
The higher the chiropractor's AACPPY, the greater the discount applied to the chiropractor's
billings the following year. The applicable discount was applied to the maximum allowed
payment under the CAP contract. Thus, in 1996, Blue Cross agreed to pay Dr. Beck's usual
charge for covered services, not to exceed the maximum allowed payment under the CAP
contract less Dr. Beck's 50 percent discount under the KCN contract. No discount was
applied to Dr. Beck under the KCN contract from 1991 through 1995.

Blue Cross required health care providers to submit bills using the American
Medical Association Current Procedure Technology (CPT) codes. However, the inclusion of a
procedure in the codes did not mean that Blue Cross provided coverage for that procedure.
The CPT code manual provided separate codes for office visits and manipulations. Blue Cross
"Policy Memo No. 2 OFFICE/OUTPATIENT VISIT" said under CONTENT OF SERVICE
that "[u]sual fees for the professional services" for office visits "are considered to include" the
examination of the patient and any manipulations, the principal treatment offered by
chiropractors. This policy is similar to the one used by Medicare, as Medicare did not pay
chiropractors separately for an office visit during which a manipulation was performed. Dr.
Beck did not exercise his right under either the CAP or the KCN contracts to declare the
Policy Memo No. 2 amendment "unacceptable." Thus, he agreed "to abide by" its terms. In
1994, however, Dr. Beck did complain to Blue Cross that he was not permitted to bill
separately for an office visit and a manipulation and was not getting paid for both services.

Dr. Beck also complained about Blue Cross' policy of paying him for adjusting
the spine as one area, regardless of the number of manipulations performed on multiple areas,
i.e., neck, mid back, and low back. This policy also was similar to Medicare's policy.
Medicare will not pay for more than one manipulation on a particular visit.

Dr. Beck also was displeased with Blue Cross' policy on treatment modalities,
i.e., heat packs, ice packs, ultrasound, traction, and therapy. If Dr. Beck were to bill
for the
use of more than two modalities per visit, Blue Cross would require additional paperwork. To
avoid delays in payment, Dr. Beck chose to bill only for two modalities, even though he may
have provided more during any given visit.

Although Dr. Beck disagreed with Blue Cross' payment policies, there is no
dispute that he knew and understood what the policies were when he signed the CAP and KCN
contracts in issue here.

Proceedings below

Dr. Beck filed a three-count petition against Blue Cross. Count I alleged that
Blue Cross violated K.S.A. 40-2,101 with respect to the CAP contract by (1) refusing to
reimburse him for services rendered and (2) refusing to reimburse him in a manner consistent
with its reimbursement of other health care providers performing similar services. Count II
alleged a violation of K.S.A. 40-2,101 with respect to the KCN contract. Dr. Beck asserted
that the sliding scale discount (1) discriminated against chiropractors, (2) failed to compensate
chiropractors fully for services provided, and (3) failed to compensate chiropractors in a
manner consistent with Blue Cross' compensation of other health care providers. Count III,
later dismissed, alleged that the KCN contract was an unfair and deceptive trade practice.

In pretrial proceedings, Blue Cross moved for summary judgment on the basis
that Dr. Beck had agreed to all of the cost containment measures challenged in his lawsuit.
Blue Cross also contended that unequal levels of reimbursement to different health care
providers did not violate K.S.A. 40-2,101. According to Blue Cross, K.S.A. 40-2,101 was
not relevant to Dr. Beck's claims because the statute prohibited neither cost containment
measures nor discrimination in the methods or rates of payment to health care providers.

In opposing the Blue Cross summary judgment motion, Dr. Beck did not
dispute either that he had entered into the contracts voluntarily or that the contracts allowed
Blue Cross to limit payment. Instead, he argued that his contracts violated K.S.A. 40- 2,101
and, therefore, were unenforceable. Dr. Beck contended that K.S.A. 40-2,101 required Blue
Cross to reimburse health care providers on an equitable basis. He also asserted that the
statute would be meaningless if it permitted Blue Cross to reimburse chiropractors at a
"substantially different level" than other health care providers.

The district court found that genuine issues of material fact precluded summary
judgment, stating:

"A plain reading of [K.S.A. 40-2,101] makes it clear the legislature intended
that a health care provider who gives a service which is within the realm of the
provider's expertise will not have that claim denied. The statute does not carry
prohibitions against reduction contracts or require equal pay for all general
services; i.e., the same rate of pay for manipulation as for back surgery. The
primary purpose of the statute was to prevent health insurance carriers from
denying a claim simply because they did not feel one area of practice governed
by the Healing Arts Act should not [sic] be considered competent. In this
manner, the statute does prevent discrimination against any field of practice
governed by the Healing Arts Act."

At trial, Dr. Beck changed his theory of the case to conform to that ruling. His
counsel stated that the issue of "disparity in pay" was taken out of the case. Instead, the
theory was that Blue Cross' strategies for containing the cost of chiropractic care violated
K.S.A. 40-2,101 because they applied primarily to chiropractors rather than to other health
care professionals.

Dr. Beck's counsel said:

"What's in the case is the fact that you won't reimburse a chiropractor for an
office visit. You either have an office visit or an adjustment. He can't have
both. You pay an MD for an office visit and other services provided. You are
unfairly discriminating against chiropractors for no good reason.

"[Counsel for Blue Cross]: I don't think that's the evidence.
I don't see us getting into that.

"[Dr. Beck's Counsel]: That's what the primary focus of my
case is going to be."

During the jury instruction conference, the district court ruled that "where any
provision of the contractual documents . . . work to deny any part of [Dr. Beck's] claims in a
discriminatory fashion, then those provisions . . . will not be enforced." Dr. Beck's position
was that a cost-containment measure applicable to chiropractors was discriminatory if it did not
apply to other health care providers in the same fashion.

Dr. Beck testified that a reasonable charge for an office visit during 1992 to
1996 was $29.50. A reasonable charge for a manipulation during the same time period was
also $29.50. He also testified "he never agreed with this price" but Blue Cross paid him
$11.75 for an individual treatment modality from 1992 to 1996.

Finding by a preponderance of the evidence that Blue Cross breached its
contracts, the jury returned a verdict in favor of Dr. Beck in the amount of $1,602,200.50.
This amount is equal to the sum of Dr. Beck's claim for damages attributable to the 1996 50
percent discount under the KCN contract ($70,000.00) and his claim related to payment of a
single amount to cover office visits and manipulations ($1,532,200.50). Blue Cross moved for
judgment as a matter of law. The motion was denied.

DISCUSSION

Blue Cross argues on appeal that the district court erred in denying its K.S.A.
2001 Supp. 60-250 motion for judgment as a matter of law. It contends that K.S.A. 40- 2,101
does not prohibit insurers from entering into cost-control agreements. We agree.

Dr. Beck raised seemingly contradictory claims in his petition against Blue
Cross. He argued both that (1) Blue Cross breached the contracts, and (2) Blue Cross adhered
to the contracts but certain provisions were void under K.S.A. 40-2,101. The contradiction
points up the lack of merit in his arguments.

"Notwithstanding any provision of any individual, group or
blanket policy of accident and sickness, medical or surgical expense insurance
coverage or any provision of a policy, contract, plan or agreement for medical
service, issued on or after the effective date of this act, whenever such policy,
contract, plan or agreement provides for reimbursement or indemnity for any
service which is within the lawful scope of practice of any practitioner licensed
under the Kansas healing arts act, reimbursement or indemnification under
such policy contract, plan or agreement shall not be denied when such service
is rendered by any such licensed practitioner within the lawful scope of his
license."

In his appellate brief, Dr. Beck asserts that there were four violations of K.S.A.
40- 2,101 in his contracts with Blue Cross: (1) refusal to pay separately for office visits and
manipulations, (2) application of the KCN contract discount, (3) limitation of the number of
modalities to two per visit, and (4) refusal to pay for more than one manipulation of the spine
per visit.

The district court's theory, announced during the jury instructions conference,
was significant in permitting Dr. Beck's claims to go to the jury. The district court ruled that
"where any provision of the contractual documents, including the policies, work to deny any
part of the plaintiff's claims in a discriminatory fashion, then those provisions . . . will not be
enforced."

Blue Cross contends that no fair reading of K.S.A. 40-2,101 can support such a
theory. It argues that K.S.A. 40-2,101 prevents insurance companies from refusing to pay
otherwise authorized charges to a provider who acts within the scope of his or her license.
Blue Cross opines that the statute does not prohibit the use of creative cost- containment
devices, even if those devices affect different kinds of health care providers in different ways.
We agree.

K.S.A. 40-2,101 requires that Blue Cross pay for covered services if those
services are within the scope of Dr. Beck's license. The statute says nothing about the price
Blue Cross must pay for such services or the conditions that Dr. Beck must meet in order to
receive payment. If Blue Cross provides coverage for a particular service, and Dr. Beck, as a
provider, is licensed to provide that type of service, then Blue Cross must pay for that service
in some fashion. K.S.A. 40-2,101 does not attempt to define what that fashion is. The statute
does not dictate the price that Blue Cross must pay, the method of payment, or the conditions
for payment.

Blue Cross argues that the legislature has affirmatively approved of the concept
of cost containment in health insurance. It points to K.S.A. 40-231, which contains various
prohibitions on the business in which an insurance company may engage. K.S.A. 40-231(b)
provides in pertinent part:

"This section shall not prohibit an insurance company:

. . . .

(3) from negotiating and entering into contracts for alternative rates of
payment with health care providers or other parties who have arranged for
alternative rates of payment with health care providers, and offering the benefit
of such alternative rates to insureds who select such providers."

Blue Cross reasons that the legislature's approval of alternative rates of payment
in K.S.A. 40-231(b)(3) must harmonize with K.S.A. 40-2,101. We agree. Dr. Beck counters
that K.S.A. 40-231(b)(3) has no effect on the interpretation of K.S.A. 40-2,101. If K.S.A.
40-231(b)(3) provides any guidance here, argues Dr. Beck, it is that the legislature could have
explicitly exempted contracts for alternative rates of payment with health care providers from
the provisions of K.S.A. 40-2,101.

Blue Cross argues that it is clear that K.S.A. 40-2,101 does not prohibit a
disparate impact on different types of health care providers in either the price they receive or
the terms and conditions of their payments. It notes that K.S.A. 40-2,101 does not use the
term "discrimination," while other sections of the Kansas Insurance Code specifically prohibit
discrimination. See K.S.A. 40-2,109 (prohibiting "unfair discriminatory premiums, policy
fees or rates" based on mental or physical handicaps); K.S.A. 2001 Supp. 40-2404(7)(b)
(prohibiting "unfair discrimination" in the "amount of premium, policy fees or rates charged
for any policy or contract of accident or health insurance"); K.S.A. 40-2215(e)(1) (prohibiting
"unfairly discriminatory rate[s]" charged to group sickness and accident policies providing
hospital, medical, or surgical expense benefits). We agree with Blue Cross' contention that
K.S.A. 40-2,101 and K.S.A. 40-231(b)(3) are to be harmonized.

The legislative history of K.S.A. 40-2,101 supports our conclusion. According
to Dr. Beck, the purpose of K.S.A. 40-2,101 is shown in the title of this enactment. Dr. Beck
quotes from the 1973 Kansas Session Laws that the act "[prohibits] the granting of any
preference or discriminating between providers of health care services." L. 1973 ch. 195, §
1.
However, Dr. Beck ignores other persuasive legislative history. During hearings on Senate
Bill 277, which was later codified as K.S.A. 40-2,101, Dale M. Sprague, executive director
and legal counsel of the Kansas Chiropractors Association, entered the following remarks on
the record:

"S.B. 277 as written is designed to remove long time
discrimination against the Chiropractic patient by the insurance industry.
Basically it provides the patient 'freedom of choice' to utilize the health care
services of any practitioner of the Healing Arts without financial regard and
worry that his pre-paid health insurance will not cover costs incurred. The bill
would eliminate 'double payment' by the patient, once to a third party insurer
and then to his Chiropractic doctor. It does not in any manner broaden or
[a]ffect the scope of practice of the Chiropractor." Minutes, House Committee
on Insurance, Mar. 16, 1973.

The above comments support Blue Cross' contention that K.S.A. 40-2,101 is
inapplicable to health care provider contracts; rather, the statute was intended to provide
freedom of choice to insureds. The freedom of choice concept is further emphasized by the
fact that the legislature initially considered a version of Senate Bill 277 including additional
language that "no such policy, contract, or agreement shall contain any clause or provision
designed to grant any preference to or exclude or discriminate against any service provided
by
any practitioner licensed under the Kansas Healing Arts Act." (Emphasis added.) See 1973
S.B. 277. Senator Elwaine Pomeroy successfully requested an amendment to strike that
language from the bill. Minutes, Senate Committee on Commercial & Financial Institutions,
Feb. 20, 1973. The Committee voted to delete the additional language. The Senator
subsequently explained that the Senate committee amended the bill to "take out language that
would have caused problems for Blue Cross and Blue Shield." Minutes, House Committee on
Insurance, Mar. 16, 1973.

Dr. Beck cites Cohen v. Metropolitan Life Ins. Co., 143 Misc. 2d 641, 541
N.Y.S.2d 284 (1988), and Moore v. Metropolitan Life Ins. Co., 33 N.Y.2d 304, 352
N.Y.S.2d 433, 307 N.E.2d 554 (1973), in support of his argument. Both cases are
distinguishable on their facts. In Cohen, the insurance company refused to make any
payment
to optometrists for diagnostic examinations, but it did pay ophthalmologists for such services.
In Moore, the insurance company refused to make any payment to psychologists for
psychological services. Under Dr. Beck's provider contract with Blue Cross, chiropractic
manipulations were paid as an included portion of the office visit. Likewise, the
contract
allowed Dr. Beck compensation for the administration of treatment modalities.

Under a plain reading of K.S.A. 40-2,101, the contracts between Blue Cross
and Dr. Beck in issue here did not violate the statute. Our holding disposes of the case; thus,
we do not reach Blue Cross' alternative argument that, even if K.S.A. 40-2,101 prohibits
disparate treatment of health care providers, there was insufficient evidence of a disparate
impact on Dr. Beck.

The judgment is reversed. The case is remanded with instructions to enter
judgment as a matter of law for Blue Cross.

ABBOTT, J., not participating.

CAROL A. BEIER, J., assigned.1

1REPORTER'S NOTE: Judge Beier, of the Kansas Court of
Appeals, was appointed to hear
case No. 86214 vice Justice Abbott pursuant to the authority vested in the Supreme Court by
K.S.A. 20-3002(c).